Correlation Between Constellation Software and East Side

Can any of the company-specific risk be diversified away by investing in both Constellation Software and East Side at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Constellation Software and East Side into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Constellation Software and East Side Games, you can compare the effects of market volatilities on Constellation Software and East Side and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Constellation Software with a short position of East Side. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellation Software and East Side.

Diversification Opportunities for Constellation Software and East Side

-0.82

Correlation Coefficient

Constellation Software  East Side

Pay attention - limited upside

The 3 months correlation between Constellation and East is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Software and East Side Games in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East Side Games and Constellation Software is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Constellation Software are associated (or correlated) with East Side. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East Side Games has no effect on the direction of Constellation Software i.e., Constellation Software and East Side go up and down completely randomly.

Pair Corralation between Constellation Software and East Side

Assuming the 90 days trading horizon Constellation Software is expected to generate 0.39 times more return on investment than East Side. However, Constellation Software is 2.58 times less risky than East Side. It trades about 0.13 of its potential returns per unit of risk. East Side Games is currently generating about -0.07 per unit of risk. If you would invest  418,016  in Constellation Software on September 5, 2024 and sell it today you would earn a total of  46,987  from holding Constellation Software or generate 11.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Constellation Software  vs.  East Side Games

Constellation Software

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Constellation Software are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Constellation Software may actually be approaching a critical reversion point that can send shares even higher in January 2025.

East Side Games

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days East Side Games has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Constellation Software and East Side

The main advantage of trading using opposite Constellation Software and East Side positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellation Software position performs unexpectedly, East Side can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in East Side will offset losses from the drop in East Side's long position.

The idea behind Constellation Software and East Side Games pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.